Crocs were born of the economic boom.
The colorful foam clogs appeared in 2002, just as the country was recovering from a recession. Brash and bright, they were a cheap investment (about $30) that felt good and promised to last forever. Former President George W. Bush wore them. Aerosmith lead singer Steven Tyler wore them. Your grandma wore them. They were mocked by the fashion world, but 100 million pairs were sold in seven years.
Then the boom times went bust, and Crocs went to the back of the closet.
The company had expanded to meet demand, but customers cut back. Last year Crocs Inc. lost $185.1 million, slashed roughly 2,000 jobs and scrambled to pay down millions in debt. Now it’s stuck with a surplus of shoes, and its auditors have wondered whether it can stay afloat. It has until the end of September to pay off its debt.
“The company’s toast,” said Damon Vickers, a fund manager at Nine Points Capital Partners in Seattle.
Two summers ago, Nancy Fisher of Washington, D.C., bought two pairs of Crocs, one green and one pink, for her daughters. The girls, now 8 and 12, wore them constantly and even got charms to decorate the tops. This year, the shoes are forgotten.
“They were their go-to,” Fisher said, “and now they’re just really interested in flip-flops.”
At the height of the real estate market, in 2006, the company sold shares to the public, raising more than $200 million in the biggest stock offering in shoe history. It ramped up manufacturing to keep up with demand, only then to find that shoppers were snapping their wallets shut.
Rachel Weingarten, a trend and marketing expert, has relegated Crocs to the wasteland of the comfort-shoe aisle. Maybe in a decade nostalgia will set in, said Weingarten, author of “Career and Corporate Cool.” Then a pair of hot-pink Crocs dug from the back of the closet might inspire misty-eyed memories: “Remember when we had ugly, Flintstone-looking feet?”
Crocs not only had a look, they had a story. In 2002, three friends from Boulder, Colo., got hold of technology developed in a Canadian laboratory that created a lightweight, antimicrobial foam. They called it Croslite and molded it into a boating and water-sports shoe they named Beach.
The shoes quickly developed a following among landlubbers as well. Gardeners touted their stability, runners enjoyed their light feel, and the chairman of the Crocs board wore them with his tuxedo.
The company used money from its public stock offering to diversify and acquire new businesses, such as Jibbitz, which makes charms designed to fit Crocs’ ventilating holes, and Fury Hockey, which used Croslite to make sports gear. It built manufacturing plants in Mexico and China and operated distribution centers in the Netherlands and Japan. More than half of Crocs were sold outside the U.S.
Then Chief Executive John Duerden wrote in an e-mail: “The industry was taken by surprise by the severity of the downturn. It affected us more than most because the brand had been gearing up for a continuation of the extraordinary growth in the prior years.”
But the shoes were hitting a saturation point; the problem with a nearly indestructible product is that shoppers rarely need to replace it.
A venture into Croslite clothing in 2007 fell flat. The company liquidated Fury Hockey last year.
The company swung from a profit of $168.2 million in fiscal 2007 to a loss of $185.1 million last year. In its annual report, Crocs said an independent auditor expressed concerns about “conditions that raise substantial doubt about our ability to continue.” Its stock price has plummeted 76%.
Duerden, who replaced CEO Ron Snyder five months ago, believes there is life yet in Crocs and plans to market them to caterers, medical workers and people with foot problems.
“The bottom line is, people talk about Crocs,” he said at a conference with analysts. “They either love them or hate them, but it’s in the vernacular.”